A health insurance policy in California contains a provision for 'Other Insurance in This Insurer'. This provision specifies that if an insured has multiple policies with the same insurer that cover the same loss, and the total benefits exceed a certain amount, the excess will be returned to the insured. What is the usual treatment of premiums paid for the excess coverage under this provision?
- AThe premiums for the excess coverage are applied to future policy premiums.
- BThe premiums for the excess coverage are forfeited to the insurer.
- CThe insurer will refund all premiums paid for the excess coverage.
- DThe insurer will refund the portion of the premiums paid for the excess coverage.
Show answer & explanationAnswer & explanation
Correct answer: D. The insurer will refund the portion of the premiums paid for the excess coverage.
Under the 'Other Insurance in This Insurer' provision, if benefits from multiple policies with the same insurer exceed a maximum limit, the insurer is typically liable only for the maximum amount. The premiums paid for the excess coverage are usually refunded to the insured, prorated for the period of the excess.
Why the other options are wrong
- A. Applying to future premiums is not the standard treatment for excess coverage under this provision.
- B. Forfeiture of premiums would be unfair to the insured who paid for coverage they couldn't fully utilize.
- C. Refunding 'all' premiums is too broad; it's only the portion attributable to the excess coverage.
Other Insurance in This Insurer (A&H)
A mandatory provision in Accident and Health policies that addresses situations where an insured has multiple policies covering the same loss with the same insurer, limiting total benefits and providing for premium refunds.
- Prevents over-insurance with a single insurer.
- Limits total benefits payable to a specified maximum.
- Premiums for excess coverage are typically refunded on a prorated basis.
Memory trick: Too much 'Other Insurance' with the 'Same Insurer' means they'll 'Refund' your extra 'Premium' for the 'Excess'.